The global economy is moving ahead at a healthy clip, with almost every country posting positive economic growth this year, according to an International Monetary Fund report.
Despite soaring oil prices, just three of the 184 IMF member nations are expected to see their economies shrink this year -- Equatorial Guinea, the Seychelles and Zimbabwe. The world as a whole will top 4% growth for the fourth-consecutive year, the IMF predicted in its twice-yearly World Economic Outlook. This year's growth may reach 4.9%, the report said.
"It would be fair to say to the world, 'You've never had it so good,'" IMF chief economist Raghuram Rajan told journalists at the report's release yesterday.
Well, David Farrar is not that happy, and Rajan does suggest that it may be best if you step away from the punchbowl, especially if you are an American:
Mr. Rajan said the IMF's primary concern is that world leaders aren't taking advantage of this happy economic moment to adopt the tough measures that would be even harder to sell should the global economy slow down. Failure to deal with the massive trade imbalances increases the possibility that currencies will adjust suddenly -- the dollar might plunge, for instance -- causing a spike in interest rates and a screeching slowdown in economic growth.
To prevent such an event, Mr. Rajan advised, the U.S. should increase its national savings -- code for cutting the federal budget deficit more aggressively than the Bush administration has so far indicated it plans to attempt.
If that isn't exactly novel advice, neither is this:
China, which runs an enormous trade surplus with the U.S., should allow the yuan to rise against the dollar, the IMF said, and create conditions that will encourage Chinese citizens and businesses to spend their earnings, creating a larger market for American goods and services. Other Asian nations that keep their currencies artificially weak against the dollar should do the same, the IMF said.
Repetitive, of course, doesn't necessarily mean wrong.
UPDATE: The IMF report is here.